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Stewardship Financial Corporation Announces Fourth Quarter and Year End 2018 Results

Company Release - 2/21/2019 4:05 PM ET

MIDLAND PARK, N.J., Feb. 21, 2019 (GLOBE NEWSWIRE) -- Stewardship Financial Corporation (NASDAQ:SSFN), parent company of Atlantic Stewardship Bank, today announced earnings for the fourth quarter and full year ended December 31, 2018.  Net income for the three months and year ended December 31, 2018 was reported at $1.8 million, or $0.20 per share, and $8.0 million, or $0.93 per share, respectively.  For the three months and year ended December 31, 2017, net income was $48,000, or $0.01 per share, and $3.9 million, or $0.50 per share, respectively.  Both the three months and year ended December 31, 2017 were impacted by a charge of $1.4 million as a result of the enactment of the Tax Cuts and Jobs Act (“Tax Act”) in December 2017.

Commenting on the annual results, Stewardship Financial Corporation’s President and Chief Executive Officer, Paul Van Ostenbridge indicated, “2018 was another profitable year for the Corporation with positive growth in loans and continued excellent credit metrics.  Our ongoing efforts remain focused on the fundamentals of our business, including low-cost deposit gathering and organic loan growth with disciplined underwriting standards.”

Operating Results
Net interest income of $7.1 million and $28.2 million was reported for the three months and year ended December 31, 2018, respectively.  Such represented an improvement over the $6.8 million and $26.4 million realized in the comparable prior year periods.  The increase was primarily a result of increased interest income on loans due to both higher average balances and loan yields, partially offset by increased interest expense.  With four interest rate increases during 2018, management increased rates on several accounts and offered special rates to attract new deposits which contributed to higher funding costs.  Reflective of the current interest rate environment, net interest margin has remained relatively stable for the last several quarters.  Net interest margins of 3.11% and 3.14% for the three months and year ended December 31, 2018, respectively, were relatively flat to the prior year periods.  Van Ostenbridge stated, "Despite a challenging interest rate environment and navigating our intensely competitive market, we continue to appropriately price both loans and deposits.  With respect to loans, we will not sacrifice our strong underwriting guidelines simply for the sake of loan growth."

For both the three months and year ended December 31, 2018, the Corporation recorded reversals of the allowance for loan losses resulting in negative provisions for loan losses of $10,000 and $1.6 million, respectively.  This compared to positive provisions for loan losses of $75,000 and $655,000 for the three months and year ended December 31, 2017, respectively.  Notwithstanding the growth in the loan portfolio, the negative loan loss provisions reflected, in part, net recoveries of previously charged off loan balances of $32,000 and $779,000 for the three months and year ended December 31, 2018, respectively.  In addition, the negative provisions for loan losses reflected the continued improvement in the economic conditions and overall real estate climate in the primary business markets in which the Corporation operates.

For the three months and year ended December 31, 2018, noninterest income was $996,000 and $3.4 million, respectively, compared to $850,000 and $3.3 million in the equivalent prior year periods.  In connection with the establishment of a Small Business Administration ("SBA") department in late 2017, noninterest income for the three months and year ended December 31, 2018 included $64,000 and $193,000, respectively, of gains from the sale of the guaranteed portion of newly originated SBA loans.  The three months and year ended December 31, 2018 also included $217,000 and $80,000, respectively, of mark-to-market adjustments of a CRA investment which is classified as an equity security.  Such security has been owned for years for Community Reinvestment Act ("CRA") purposes, but in connection with the adoption of ASU 2016-01, equity securities now require a quarterly mark-to-market through the income statement.  Offsetting these increases, for the three months and year ended December 31, 2018, the Corporation realized $192,000 and $186,000, respectively, of losses on calls and sales of securities primarily due to the sale of approximately $2.0 million of the above mentioned CRA investment during the year ended December 31, 2018.  In addition, gain on sales of mortgage loans were $70,000 for the year ended December 31, 2018 compared to gains of $178,000 realized in the prior year.

Noninterest expenses were $5.7 million and $22.1 million for the three months and year ended December 31, 2018, respectively, compared to $5.1 million and $20.3 million in the same prior year periods.  Increases in salaries and employee benefits represents an increase in staff to support the Corporation's operations and continued growth, including costs associated with the establishment of the previously mentioned SBA Lending Department.  Additionally, advertising expenses for the year ended December 31, 2018 included certain costs associated with the launch of a new and improved website (ASBnow.bank) in the fall.

Results for the current year periods included the impact of a reduction in the Federal corporate income tax rate from 35% to 21% effective January 1, 2018 as a result of the enactment of the Tax Act.  Partially offsetting the lower Federal corporate income tax rate was the enactment of legislation by the State of New Jersey in July of 2018, which increased the corporate state income tax rate to 11.5% from 9% for taxable income of $1.0 million or more retroactively to January 1, 2018.  For the current three months and year ended December 31, 2018, the effective tax rate was 29.0% and 27.3%, respectively.  As noted previously, the prior year periods reflected $1.4 million of additional tax expenses due to the revaluation of the Corporation's net deferred tax asset as a result of the reduction in the corporate Federal tax rate.

Balance Sheet / Financial Condition
At December 31, 2018, total assets of $955.6 million reflected a $26.9 million increase from assets of $928.8 million at December 31, 2017.  Loans, which represent 76% of totals assets, contributed $22.8 million to the asset growth.  The loan portfolio, during 2018, reflected greater prepayment activity than was experienced during 2017.

At December 31, 2018, total deposits were $782.1 million, showing net growth of $18.0 million since December 31, 2017.  The Corporation reported net growth of $1.9 million in noninterest-bearing accounts and $16.1 million in interest-bearing accounts.

The Corporation continued to maintain capital levels in excess of the regulatory requirements and was categorized as "well-capitalized."  The Tier 1 leverage ratio was 9.33% at December 31, 2018 compared to 8.88% at December 31, 2017.  The total risk based capital ratios at December 31, 2018 and 2017 were 14.39% and 14.29%, respectively.

About Stewardship Financial Corporation
Stewardship Financial Corporation’s subsidiary, the Atlantic Stewardship Bank, has 12 banking offices in Midland Park, Hawthorne, Montville, Morristown, North Haledon, Pequannock, Ridgewood, Waldwick, Wayne (2), Westwood and Wyckoff, New Jersey.  The Bank is known for tithing 10% of its pre-tax profits to Christian and local charities.  To date, the Bank’s tithe donations total over $10.1 million.  We invite you to visit our website at www.ASBnow.bank for additional information.

The information disclosed in this document contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “plan,” “estimate,” and “potential.”  Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of the Corporation that are subject to various factors which could cause actual results to differ materially from these estimates.  These factors include changes in general, economic and market conditions, legislative and regulatory conditions, or the development of an interest rate environment that adversely affects the Corporation’s interest rate spread or other income anticipated from operations and investments.

 

 
Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
          
 December 31, September 30, June 30, March 31, December 31,
 2018 2018 2018 2018 2017
          
Selected Financial Condition Data:         
  Cash and cash equivalents$16,823  $10,839  $13,529  $22,178  $21,270 
  Securities available for sale108,811  109,764  112,594  106,467  109,259 
  Securities held to maturity62,308  62,227  58,471  51,894  52,442 
  Other equity investments1,648  3,661  3,694  3,706  3,756 
  FHLB stock3,965  3,552  3,087  3,039  3,715 
  Loans held for sale    607    370 
  Loans receivable:         
  Loans receivable, gross733,787  729,475  722,148  708,169  711,720 
  Allowance for loan losses(7,926) (7,904) (8,353) (8,445) (8,762)
  Other, net(457) (483) (484) (448) (397)
  Loans receivable, net725,404  721,088  713,311  699,276  702,561 
  Bank owned life insurance21,636  21,498  21,360  21,222  21,084 
  Other assets15,035  15,484  15,034  14,659  14,309 
  Total assets$955,630  $948,113  $941,687  $922,441  $928,766 
          
          
  Noninterest-bearing deposits$174,717  $190,303  $188,343  $178,572  $172,861 
  Interest-bearing deposits607,374  596,263  603,718  593,644  591,238 
  Total deposits782,091  786,566  792,061  772,216  764,099 
  Other borrowings65,700  56,800  46,700  48,760  63,760 
  Subordinated debentures and         
    subordinated notes23,382  23,366  23,350  23,333  23,317 
  Other liabilities4,307  3,462  3,388  3,760  3,925 
  Total liabilities875,480  870,194  865,499  848,069  855,101 
  Shareholders' equity80,150  77,919  76,188  74,372  73,665 
  Total liabilities and shareholders' equity$955,630  $948,113  $941,687  $922,441  $928,766 
          
  Gross loans to deposits93.82% 92.74% 91.17% 91.71% 93.14%
          
  Equity to assets8.39% 8.22% 8.09% 8.06% 7.93%
          
  Shares outstanding8,680,388  8,678,454  8,676,843  8,674,890  8,652,804 
  Book value per share$9.23  $8.98  $8.78  $8.57  $8.51 
          
Asset Quality Data:         
  Nonaccrual loans$1,544  $1,271  $1,283  $1,136  $1,194 
  Loans past due 90 days or more and         
    accruing         
  Total nonperforming loans1,544  1,271  1,283  1,136  1,194 
  Other real estate owned         
  Total nonperforming assets$1,544  $1,271  $1,283  $1,136  $1,194 
          
  Nonperforming loans to total loans0.21% 0.17% 0.18% 0.16% 0.17%
  Nonperforming assets to total assets0.16% 0.13% 0.14% 0.12% 0.13%
  Allowance for loan losses to total gross         
    loans1.08% 1.08% 1.16% 1.19% 1.23%


 
Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
        
 For the three months ended For the year ended
 December 31, December 31,
 2018 2017 2018 2017
Selected Operating Data:       
Interest income$9,377  $8,463  $35,999  $32,230 
Interest expense2,247  1,628  7,836  5,858 
Net interest income7,130  6,835  28,163  26,372 
Provision for loan losses(10) 75  (1,615) 655 
Net interest income after provision for loan losses7,140  6,760  29,778  25,717 
Noninterest income:       
Fees and service charges628  533  2,228  2,111 
Bank owned life insurance138  141  552  526 
Gain (loss) on calls and sales of securities(192)   (186) 1 
Gain on sales of mortgage loans27  55  70  178 
Gain on sales of SBA loans64    193   
Gain on sale of other real estate owned      13 
Gain on equity investments217    80   
Miscellaneous114  121  480  478 
Total noninterest income996  850  3,417  3,307 
Noninterest expenses:       
Salaries and employee benefits3,200  2,888  12,636  11,455 
Occupancy, net430  414  1,701  1,630 
Equipment191  176  746  673 
Data processing496  442  1,947  1,811 
Advertising159  171  715  700 
FDIC insurance premium77  86  277  322 
Charitable contributions355  240  910  615 
Bank-card related services142  130  533  551 
Other real estate owned, net      24 
Miscellaneous609  521  2,680  2,520 
Total noninterest expenses5,659  5,068  22,145  20,301 
Income before income tax expense2,477  2,542  11,050  8,723 
Income tax expense718  2,494  3,020  4,776 
Net income$1,759  $48  $8,030  $3,947 
        
Weighted avg. no. of diluted common shares8,679,304  8,648,191  8,672,840  7,906,791 
Diluted earnings per common share$0.20  $0.01  $0.93  $0.50 
        
Return on average common equity8.86% 0.26% 10.54% 5.86%
        
Return on average assets0.73% 0.02% 0.86% 0.45%
        
Yield on average interest-earning assets4.09% 3.82% 4.02% 3.83%
Cost of average interest-bearing liabilities1.31% 0.97% 1.17% 0.91%
Net interest rate spread2.78% 2.85% 2.85% 2.92%
        
Net interest margin3.11% 3.09% 3.14% 3.13%


 
Stewardship Financial Corporation
Selected Consolidated Financial Information
(dollars in thousands, except per share amounts)
(unaudited)
          
 For the three months ended
 December 31, September 30, June 30, March 31, December 31,
 2018 2018 2018 2018 2017
Selected Operating Data:         
Interest income$9,377  $9,215  $8,868  $8,539  $8,463 
Interest expense2,247  2,013  1,860  1,716  1,628 
Net interest income7,130  7,202  7,008  6,823  6,835 
Provision for loan losses(10) (490) (780) (335) 75 
Net interest and dividend income after provision for loan losses7,140  7,692  7,788  7,158  6,760 
Noninterest income:         
Fees and service charges628  542  551  507  533 
Bank owned life insurance138  138  138  138  141 
Gain (loss) on calls and sales of securities(192)     6   
Gain on sales of mortgage loans27  12  9  22  55 
Gain on sales of SBA loans64  70  59     
Gain (loss) on equity investments217  (34) (29) (74)  
Miscellaneous114  109  131  126  121 
Total noninterest income996  837  859  725  850 
Noninterest expenses:         
Salaries and employee benefits3,200  3,198  3,129  3,109  2,888 
Occupancy, net430  426  403  442  414 
Equipment191  186  188  181  176 
Data processing496  489  478  484  442 
Advertising159  192  207  157  171 
FDIC insurance premium77  66  70  64  86 
Charitable contributions355  180  195  180  240 
Bank-card related services142  133  131  127  130 
Miscellaneous609  684  703  684  521 
Total noninterest expenses5,659  5,554  5,504  5,428  5,068 
Income before income tax expense2,477  2,975  3,143  2,455  2,542 
Income tax expense718  813  842  647  2,494 
Net income$1,759  $2,162  $2,301  $1,808  $48 
          
          
Weighted avg. no. of diluted common shares8,679,304  8,677,445  8,675,868  8,658,506  8,648,191 
Diluted earnings per common share$0.20  $0.25  $0.27  $0.21  $0.01 
          
Return on average common equity8.86% 11.14% 12.32% 9.92% 0.26%
          
Return on average assets0.73% 0.90% 0.99% 0.80% 0.02%
          
Yield on average interest-earning assets4.09% 4.04% 3.99% 3.94% 3.82%
Cost of average interest-bearing  liabilities1.31% 1.18% 1.12% 1.04% 0.97%
Net interest rate spread2.78% 2.86% 2.87% 2.90% 2.85%
          
Net interest margin3.11% 3.16% 3.16% 3.15% 3.09%


 
Stewardship Financial Corporation
Non-GAAP Reconciliation
(dollars in thousands, except per share amounts)
(unaudited)
    
 For the three
months ended
December 31,
2017
 For the year
ended
December 31,
2017
    
  Net income$48  $3,947 
 Impact of Tax Act1,420  1,420 
  Adjusted net income$1,468  $5,367 
    
  Weighted avg. no. of diluted common shares8,648,191  7,906,791 
  Adjusted diluted earnings per common share$0.17  $0.68 
    
  Adjusted return on average common equity7.82% 7.96%
    
  Adjusted return on average assets0.63% 0.61%
      


Contact: 
Claire M. Chadwick 
Executive Vice President and 
Chief Financial Officer 
630 Godwin Avenue 
Midland Park, NJ 07432 
P: 201.444.7100 

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Source: Stewardship Financial Corp